This is pretty darn funny...

I had to laugh when I came across these yesterday.  You know how my method is to keep things very simple and just focus on trends and supply and demand levels.  I think things like Gann Theory and Elliot waves are like UFOs and to talk about but hardly credible. 

Yesterday was the first time I've ever come across so-called Harmonic Patterns.  This has to be some of the most ridiculous type of technical analysis that I have ever seen..  See if you can read the following without laughing.  I can't.


Harmonic Patterns

The similarity between harmonic and basic chart patterns is that, for each of them, the shape and structure are key factors to recognizing and validating a specific pattern. The next price movement can thus be projected with the goal of turning these patterns into profits. However, a key difference is that harmonic patterns are defined more precisely. They are 5-point reversal structures, containing combinations of well defined consecutive Fibonacci retracements and Fibonacci extensions, leaving less room for flexible interpretation.

Harmonic patterns continuously repeat themselves, especially in consolidating markets. There are basically 2 types of patterns: 5-point retracement structures like the Gartley and the Bat and 5-point extension patterns like the Butterfly and the Crab. Trading harmonic patterns requires patience because, due to the specificity of the ratios, patterns that appear harmonic may not be if they don't align with the proper measurements.



The Shark pattern is a distinct 5-point reversal structure that was discovered by Scott Carney in 2011. It is similar to the Bat Pattern, except for the C point exceeding the BC leg. It can point to a strong counter-trend move. The potential Reversal Zone (PRZ) is defined by the following harmonic levels: the 0.886 retracement of initial leg and the 1.13 reciprocal ratio of the initial leg. Targets can be various retracements of the CD leg, all the way up to C itself. There are different methods of determining where the stop would go. Some put it beyond the next structure level after the D point, others choose the 1.41 extension of XA.

Conservative traders look for additional confirmation before entering a trade based on an indicator value, a specific candlestick pointing at a reversal or confluence with other methods. The Shark pattern can be either bullish or bearish. It is as effective as other harmonic patterns and a common variation on trading this pattern is to trade the last leg to completion. 



The Butterfly Pattern is a distinct 5-point extension structure that was discovered by Bryce Gilmore and further defined by Scott Carney. It has specific Fibonacci measurements for each point within its structure and it is important to note that D is not a point, but rather a zone in which price is likely to reverse, called the Potential Reversal Zone (PRZ). The B point retracement of the primary XA leg lies at 0.786 and the PRZ consists of 3 converging harmonic levels: 1) 1.27 extension of the primary XA leg, 2) AB=CD pattern, either equivalent or 1.27 and 3) Extreme BC projection of 2.00, 2.24 or 2.618.

The first target would be the 382 retracement of AD and the second target the 618 retracement of AD. Common stop levels lie behind the next structure level after the D point or the 1.41 extension of XA. Conservative traders look for additional confirmation. These patterns can be bearish and bullish. 


Three Drives

The Three Drives pattern was originally outlined by Robert Prechter. It is not used often in trading, because it is rare to spot and far less common than other harmonic patterns. It consists of symmetrical price movements with identical Fibonacci projections in a 5-wave structure. The Three Drives pattern is defined by three distinct, consecutive and symmetrical drives to a top or bottom where each drive completes at 1.13, 1.27 or 1.618. Symmetry in both price and time is critical. It is important not to force the pattern on the chart. If it is not really there, the best decision would be not to trade it.

A reversal is likely to happen at the completion of the third drive. Conservative traders look for additional confirmation that price is reversing. Targets can be set at the discretion of the trader but normally extend beyond the last retracement. If the pattern fails, this could point to a strong continuation in the previously dominant direction. The Three Drives pattern can be either bullish or bearish. 



Do YOU have any idea what they are talking about, because I sure as hell don't.

There are various other patterns but they all are equally ridiculous.  I find it hard to believe that anyone could take this nonsense seriously.  But then again, I find it hard to believe that people believe in UFOs and Big Foot.